Stocks rise during Congress’s summer recess, due to regulatory uncertainty
A study found that stock prices tend to rise and market volatility falls when Congress goes into its summer recess. The study analyzed that regulatory uncertainty created by legislative activity increases volatility during active periods.
An analysis has found that stocks tend to rise when Congress goes into its summer recess. The analysis was drawn by comparing stock market movements during the recess period and during periods of legislative activity.
The analysis pointed out that market volatility increases when legislative activity is strong. The study identified regulatory uncertainty as the cause of the volatility expansion.
The study concluded that legislative activity itself causes price fluctuations. It said this cannot be explained by other factors such as economic indicators or corporate earnings.
The analysis added that during recess periods, the effect of reduced risk aversion appears. The explanation is that as legislative uncertainty decreases, investor sentiment becomes more stable.
Specific descriptions of the subjects analyzed and the methods used vary according to the original paper. The study said it confirmed this correlation by comparing market data from multiple points in time.
What investors should note is that congressional schedules can affect market sentiment. Changes in future legislative schedules could be a factor in short-term market volatility.
Sources: MarketWatch Top Stories
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